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-Case Report
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Contents
Introduction and Company Background......................................................................3
Part 1: External Analysis............................................................................................. 4
Political Factors........................................................................................................ 4
Economic Factors..................................................................................................... 4
Social-Cultural Factors............................................................................................. 5
Technological Factors............................................................................................... 5
Environmental Factors............................................................................................. 6
Legal Factors........................................................................................................... 6
Industry Analysis Five Forces Model.........................................................................6
Threat of New Entrants............................................................................................ 7
Supplier Power......................................................................................................... 7
Degree of Rivalry..................................................................................................... 7
Buyer Power............................................................................................................ 8
Threat of Substitutes............................................................................................... 8
Part 2 Internal Analysis............................................................................................ 9
Part 3 Corporate and Business Strategy................................................................11
Part 4 -----Issues and Challenges.............................................................................. 12
Part 5-- Strategic Options for Growth........................................................................13
Part 6-- Recommendations and Conclusion..............................................................15
References.......................................................................................................... 16
Political Factors
The market for luxury goods can segregate into Europe, America, Asia-Pacific, Japan
emulated by the remaining countries in accordance with their region. In general, the
countries having significant consumption of the luxury goods have a political
environment that is to some extent stable within the most recent years. Be that as it
may, the financial turmoil of the government along with the some of the
government's
measures
related
to
austerity
demonstrated
fundamental
debilitating demand of such luxury goods for the local individuals (Manlow, 2015).
However, the travelers from different nations filled gap. The approach related to
import duty within diverse nations is another variable ought to be considered within
the industry. The import duty being high could be found to be a significant reason as
to the differences in the prices within different nations. Subsequently, there could
be a formation of the grey market within the nations that have significant
differences within the price.
Economic Factors
The industry's significant firms are located within Europe due to which the exchange
rate of Euro will be found to be an industry's essential element. The rate of growth
will be quite distinctive which being measured with nominal and euro terms.
Keeping in mind the end goal the eradication of the impact of exchange rate, the
measurement of the constant exchange rate ought to be utilized. Presently, the
market for luxury goods has around steady growth rate of 15% on a nominal basis.
Another imperative factor on an economic basis is the economic condition
throughout the world. A recession phase was encountered by the world economic
around 2008, which decelerated the price increase rate of the product. The world
economic condition within the world has been slowly recuperated, and in
accordance with the high demand and popularity in the region of Asia Pacific makes
a contribution of significant industry revenues and due to this particular reason, the
locale will have high rate of growth by anticipation within years (McCutcheon, n.d.).
Social-Cultural Factors
In the industry for global luxury goods, a large portion of the customers give
prominence to the luxury products that are usually Europe based than those made
in US and Asia. Such a behavior results in a competitive advantage within the luxury
brands of Europe. Also, clients in diverse nations have distinctive buying behaviors.
Here the example could be that the customers of some nations are willing and
agreeable to move far from regular perceived brand, on the grounds that they need
to buy more products which are exclusive in nature (McCutcheon, n.d.). Moreover, in
light of the expanding pace of globalization, individuals prefer to travel between
distinctive nations. Such travelers are found to purchase different luxury goods amid
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the trips. Moreover, the tourists from China contributed more than 33% of the
European sales. The industry for the luxury goods ought to notice to conform the
basic demand between the tourists and local people in the region of Europe.
Technological Factors
Since the online method of shopping became more widely popular, the vast majority
of luxury organizations developed their shops online to make a provision of the
convenient
and
reliable
customer
experiences.
Such
method
can
offer
Environmental Factors
The worldwide industry for luxury products can have a negative effect or influence
to environmental viewpoint if the factors of manufacturing have poor abilities
related to the control of pollution (McCutcheon, n.d.). A few organizations likewise
demolish as opposed to marking down their product in excess with a specific end
goal to keep the value of the product, which may recycle pressure and cause
additional waste, yet the case did not make a provision of the adequate information
to the environmental viewpoint.
Legal Factors
Acquisition is one of imperative strategy to develop the size of organizations along
with profitability, however it is mainly confined by law. For instance, the requirement
within the French law is that one organization ought to detail out its purchase
related activity to the other organization on the off chance that it holds an
ownership of more than 5%. In the event that the organization utilizes different
approaches to go around the law, it may confront the issues of lawsuit later on.
Supplier Power
The supplier power is extremely low since they are decentralized relatively and
more than this, there are only few significant luxury companies that dominate the
fashion industry. Numerous organizations only source the component parts and
have their own particular facilities related to in house manufacturing. Moreover,
within the industry, suppliers ought to fulfill the requirement of significant quality of
the parts of components and in addition to this, contending with the qualified
facilities of the manufacturing throughout the world (Raymundo and Moon, 2014).
The facilities of manufacturing in distinctive nations have diverse material and labor
costs that can prove to be a significant factor restricting the power of suppliers.
Degree of Rivalry
Within the industry of personal luxury goods, the degree of rivalry is found to be
moderate. Due to this particular fact, the industry has some of the large players and
therefore, it is concentrated. These organizations don't need contend over price; be
that as it may, they have a significant overlap of the category of the products. A
large portion of organizations have some characteristics that are particularly
common. They initialize their business in European zones and have basically a long
history; they all make a provision of the services and products that are exclusive
and hence, reputable due to their bands and that they have served throughout the
world a little quantity of wealthiest customers (Raymundo and Moon, 2014).
Buyer Power
In the industry for luxury goods, the level of buyer power is low to moderate. There
are mainly three segments of customers within the industry that incorporate
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aspirational, accessible and absolute. The absolute and aspirational segments value
the quality of the products than the price of products. They look for products that
are impeccable and have a high net worth. Such customers are found to be within
the group that is categorized as price insensitive while expecting products that have
high price which cannot be found affordable by most of the people (Solomon, 2010).
Apart from this, the other segment named as accessible segment is found to be
price conscious yet they willfully purchase products with high price due to their
quality which is comfortable in nature. Subsequently, the price can be controlled
within the industry and that a high level of annual growth can be retained.
Threat of Substitutes
There is absolutely no direct substitution for the luxury goods. In spite of the fact
that the products, for example, watches, jewelry, perfumes, cosmetics that are
found to have substitutions with lower price, the aspirational and absolute won't
prefer such substitutions. The customers being accessible might buy products that
have relatively lower price, however they additionally have lower commitment to
the growth of the industry as compared to the other customer segments.
By and large, the industry for the worldwide luxury goods has still a high potential of
growth within the future. However, the market for the luxury goods is globally
based, the revenues of the organizations won't be influenced significantly by a one
region or a country. The significant thing is to keep the parity of development
between distinctive nations. Organizations ought to additionally be cautious about
expanding effective production and retain the brand's heritage value. The industry
for luxury goods is an industry with high potential growth opportunities and minimal
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external risk. There are just couple of extensive players in this particular industry
and they serve to the most affluent individuals throughout the world. Such
companies have a great authority over price control and therefore, they have the
capability to grow in a sustainable manner.
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Their capabilities include the control over the process of manufacturing the products
that Louis Vuitton make and such control make sure that the products are
manufactured as per the acceptable standards. They also implement a program for
the employee training and also make an adoption of the reorganizing of the
manufacturing line. With the involvement of the machines into the production, they
have the capability to enhance the production efficiency (Vuitton bags the affluent
customers, 2005). They also have a strong control over the distribution and that
everything is mainly provided and delivered at an exact time and appropriate place
and situation.
While associating the competencies and resources, strategic capabilities can be
attained that are found to be vital components for the survival on a long term basis
along with the company's competitive advantage. A company has a dire need for
the capability to recreate and renew the strategic capabilities with a specific end
goal to address the issues of an evolving situation, which acquaints with the idea of
strategic capabilities. Within such strategic capabilities, there can be a recognition
of the two particular types. This incorporates distinctive capabilities which are
generally required for the competitive advantage and threshold capabilities which
are needed in order to fulfill the basic requirements needed within a particular
market (Vuitton bags the affluent customers, 2005). For identifying the competitive
advantage, a VRIN framework is identified. The VRIN framework is detailed out
below:
Value: LV is a valuable brand as it makes a provision of value to the customers and
along with this, the brand makes a contribution of high profits for the company.
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Rarity: From the attributes of LV, the brand is found to be rare. Only some
companies are based on quality and heritage but there is no company which
contains the exact perception of the brand in accordance with the quality
craftsmanship.
Implacability: This particular brand LV is not easy to imitate as it is based on quality
and heritage and it is not well known as to what can make a contribution to the
brand success.
Non sustainability: The brand of LV is found to be at a substitution risk. Customers
that are not that much loyal to the brand would definitely prefer to purchase from
different brands within the industry of luxury goods.
In accordance with the framework of VRIN model, it is obvious that the strategic
capabilities of Louis Vuitton satisfies each of the four criteria within the framework
of VRIN to a great extent. Such imperative strategic capabilities are interrelated.
The brand of LV dis primarily based on history and heritage due to the fact that they
have qualify craftsmanship. All the three attributes of VRIN are found to be
cornerstones for the success of LV. In the meantime the quality of the goods of LV is
particularly identified with their image emulated by the product quality for which
they don't compromised. Therefore, when LV introduces new products within their
effective range that exists already, they do it gradually to guarantee the product
quality while satisfying the desires of the customers and particularly that it satisfies
what their brand is known for i.e. quality craftsmanship.
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uniqueness and quality of the products. Their corporate level strategy is associated
with LVMH which is a parent company. It does not incorporate a unique
organizational structure and that the group members have their own organizational
structure. The control measures are employed for meeting the organizational goals
and that one control within that incorporate website and specific outlets. This
indicates that the culture within the organization targets class and quality.
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is that eye-wear is generally prominent to the women. Positioning this for men as a
luxury eye-wear would be considered generally profitable.
The third quadrant i.e. the product development incorporates the development of a
new product within the current market. It is a well known fact that the Dior brand is
owned by LVMH that has a great increase in the fragrance business market share
and Louis Vuitton can adopt for the capitalization of this particular market and
develop a line of flagrance related products which would target both men and
women that would purchase the current luxury accessories and apparel (Raymundo
and Moon, 2014).
The last quadrant will incorporate diversification which means the introduction of a
new product to the new target market. This can include a development of the
products for children. LV has already launched a significant quality of children shoes.
They can attain a significant profit from this. There is a major amount of the
households that can find the LV products affordable and hence, LV can definitely
retain a great market share within the industry for childrens apparel. Some of the
popular brands for children like Juicy Couture and Diesel cannot be considered as a
luxury products for the defined target market and LV can have a competitive
advantage for this.
Moreover, the strategic choices made above should be evaluated in accordance SFA
framework to explore if such options can be adopted by LV. In accordance with the
product development, the SFA framework can be detailed out below:
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manufacturing facilities for the product production. However, there are some of the
threats and risks for this. This can incorporate an increase in expenses without any
success assurance. There would be substantial costs for the research and
development (Manlow, 2015). They had seek for a new expertise for the
development of the perfume with high quality grade. Ultimately, there is a
significant and general expense risk.
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References
David, S. (2015). A Study on Color Sensibility Image: Focus on Louis Vuitton
Advertisements from 2003 to 2009. Journal of Investigative Cosmetology, 11(2),
pp.163-173.
Comment
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Please adjust word count from 3150 to 3500 words (excluded references)
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